NZD/USD bearish on a close below 0.6850 – UOB

FX Strategists at UOB Group noted the pair’s otulook should shift to bearish on a daily close below 0.6850.

Key Quotes

24-hour view: “Expectation for sideways trading was incorrect as NZD dropped sharply to hit an overnight low of 0.6860. While at oversold levels, the current weakness has scope to test the strong 0.6850 support before stabilization can be expected (the odds for a move below the next support at 0.6830 are not high). Resistance is at 0.6890 but only a move back above 0.6910 would indicate that a short-term low is in place”.

Next 1-3 weeks: “The continuing sharp decline in NZD yesterday came as a surprise (NZD closed lower for the fifth straight day, down by -0.55%). Downward momentum has improved considerably and the odds for a sustained break below the year-to-date low of 0.6850 have increased. In other words, a clear break of 0.6850 (say a NY close below this level) would indicate that NZD has entered a bearish phase (targeting a move to the 2017 low of 0.6780). This scenario appears likely unless NZD can reclaim the ‘key resistance’ at 0.6945 (level previously at 0.6990)”.